The Global Evolution of Cambridge’s Crossover Model of Innovation Philip Cooke, Centre for Innovation, Bergen University College Contents List 0. Executive Summary pages 2 to 3 Main Report: The Global Evolution of Cambridge’s Crossover Model of Innovation 1. Introduction pages 4 to 7 2. Cambridge Cluster: Post Porter Perspective pages 7 to 10 3. Cambridge Cluster: Who are the actors for Internationalization? ICT Hardware and Software pages 10 to 15 4. The Emergence of Cambridge Biotechnology Firms pages 15 to 19 5. Recent Important Events in Internationalisation of Systems and software design firms pages 20 to 21 6. Recent Events in the Cambridge Cleantech Cluster pages 21 to 24 7. The Role of the Public Sector pages 24 to 30 8. The Role of Intermediaries: Associational Governance and Individual Entrepreneurship pages 30 to 33 9. Initiatives have a History of Incrementalism while Policy Emerges from Below. pages 33 to 38 10. Newer Forms of Open Internationalization – Growth of Talent, Research, Innovation and Entrepreneurship pages 38 to 44 11. Concluding Remarks pages 44 to 48 12. Bibliography pages 49 to 50 1 0. Executive Summary 1. Cambridge science park was set up in 1970 with the aim to attract existing science-based industry. This was fulfilled by academic entrepreneurship based on funded research. It gave rise to an ecosystem in the form of new science and technology-based business that has been growing ever since, with a strong acceleration in the 1990s. 2. Knowledge arising from the research conducted in Cambridge is of world-class and pathbreaking, meaning that the alumni and staff have an initial advantage in publishing, being awarded Nobel Prizes and, for academic entrepreneurs, being early or first in the market with commercial innovations, innovative processes or new business models. 3. Cambridge is a collaborative enterprise complex. It has a high rate of networking among technology entrepreneurs, university researchers and government or military representatives and clients. It is not a top-down hierarchical system in any meaningful way. 4. Government intervention has been more indirect than direct although the UK has been slow until recently in promoting the idea of “innovation systems” of any kind. Accordingly there was always “arm’s length” government funding for scientific research supplemented by industry and charitable trust-funding, assisted until 2016 (Post-Brexit) by the EU Framework Programme (Horizon 2020). 5. The internationalisation actors in the Cambridge cluster-platform are; first, the University leaders and professors who are the guardians of the research ethics of a world-class knowledge-intensive research institution, second, the academic and other entrepreneurs that meet the challenge of translating research discoveries into world-beating commercial innovations, and third the support infrastructure of research, partnership and entrepreneurial financing and services. 6. There is no formal strategy, nor has there been. The main driver has been incremental, evolutionary, sometimes rapid, change. The UK is an open not a managed economy and there is no present, recognisable industrial strategy in place. 7. Internationalisation has been based on scientific and technological expertise, knowledge and excellence. Thus globally important discoveries have been made ranging from the splitting of the atom, to the discovery of DNA and the science of low energy microprocessor design software and cybersecurity. 8. There is plenty of outsourcing to global leader firms like Apple, Samsung, Google, Microsoft and so on, as testified by the existence of research institutes of many of these being found in Cambridge. 9. The local-global interaction is complex but works well. Cambridge products and services are in demand globally in diverse product and service niches. Cambridge is understood to be an innovative culture with many exploited and exploitable ideas for foreign buyers. These also invest long-term (FDI) in the Cambridge cluster-platform. 2 10. Technological inspiration emerges from large cluster-platforms like Silicon Valley and lesser ones like Cambridge. New innovation models have emerged like that discussed regarding “crossover” innovations from microelectronics to advanced combustion engines and healthcare. 3 Main Report: The Global Evolution of Cambridge’s Crossover Model of Innovation Philip Cooke 1.0 Introduction 1.1 This contribution reports on the drivers of the UK’s Cambridge “cluster”. The data show 4,330 technology companies (ICT, biotech and KIBS) which employed some 59,102 people and generated £11.1bn revenues in 2015. There are five firms worth more than £1bn and the area has one of the highest concentrations of Nobel prizewinners in the world (some 92 historically). The reported research identifies the main drivers of the cluster process, especially in respect of the international forces that have contributed to cluster growth. As part of the background analysis there is, early on in this report, a focus on the economic geography of corporate learning and knowledge flows. We place emphasis on the perspective that shows the “origins of wealth” lying in a combination (Beinhocker, 2006) of these related capabilities of international value networks. In the first section, the report identifies some milestones of corporate and regional learning. 1.2 In the second section, knowledge flows in clusters (after Michael Porter) are in focus, drawing upon key instances of research on both geographical and business literature. Here, perhaps economic geography and regional development economics were at the forefront. In the third section, we begin asking who drives internationalisation. Fourth, there follows a section on Cambridge ICT which explains a key transition point whereby corporate control of knowledge flows was “learned” by small and medium-sized enterprises (SMEs). From global supply chains and networks these have, through “outsourcing”, “global innovation networks” and “open innovation,” taken over from large firms. 4 Table 1: Cambridge Cluster Indicators ____________________________________________________ All Cambridge Total Total Companies Turnover Employees _____________________________________________________ 21,861 £33bn (7%) 196,625 (7%) All data shown are for 2014-15 and % figures are for the change from the previous year. Last update: June 2016. _________________________________________________________________________ _________ Source: CA Cambridge Ahead Fig. 1 Cambridge Business Sectors (Source: Cambridge Cluster Map) 5 1.3 In the fourth section global shift of value chains and production networks towards global innovation networks of supplier platforms in Cambridge biotechnology is briefly explored. Of importance here is the plural “industries” connotation as Cambridge once relied on ICT but has now spawned a “platform” of ICT, systems design, biotechnology and clean technology (“cleantech”). In the fifth section the chapter moves to an understanding of the consolidation of SME supplier networks. This section focuses on the now important Software and Systems Design outgrowth from ICT in Cambridge. These open up for later comparison and contrast, in Section 9, two types of SME sub-system that have become “associative” institutions in the management of corporate buyer-supplier relations, namely regional innovation systems and enterprise ecosystems. In the sixth main section we account for the rise of a Cleantech cluster accompanying the others in Cambridge. There follows a brief exegesis of the deeper structure of economic learning and knowledge flow management emphasising – importantly as the chapter clearly implies – the importance of the shift in the nature of innovation to corporate and SME supplier interactions. 1.4 In this, the form of innovation in the corporate sphere ceased being mainly linear and evolved interactively in a realisation that much innovative potential is exploitable through “crossover” or “transversal” knowledge exchange among diverse industries and services. Pipeline connections designed to be secretive are now “glass pipelines” while agglomeration “buzz” became more encrypted in “dark pools” on the “dark web”. Military knowledge underpins the cybersecurity industry as aerospace informs automotives, hydrological algorithms inform structured finance and fine chemistry informs cuisine. No single corporate actor can control this but, without it, advanced economy capital accumulation is significantly arrested. Section 7 explores the limited role of the public sector in Cambridge’s technology-led growth. There follows, in section 8 an assessment of new roles for Government in the era of “Big Data”, encryption, privacy and exploitation by new market and non-market actors. Section 9 addresses the role of “associational governance” of the Cambridge cluster. It also makes a clear distinction between Cambridge’s near-market “enterprise ecosystems” and nearer research regional innovation system (RIS). Section 10 explores the question of strategy in the evolution of the cluster. Section 11 broaches 6 questions of internationalisation, while section 12 relates processes of internationalisation and cluster localisation in corporate learning and knowledge flows. Finally section 13 marks the Conclusions of the report. 2.0 Cambridge Cluster: Post Porter Perspective 2.1 Problems with Porter’s Definition As a point of conceptual departure it is usual to note Porter’s (1998) definition of clusters as: ‘a geographically proximate group of interconnected companies and associated